1.12.2008

ER - Gallegos responds to appeal court ruling on fraud suit

Gallegos responds to appeal court ruling on fraud suit

By NATHAN RUSHTON, The Eureka Reporter
Published: Jan 12 2008, 2:21 AM

At a news conference Friday, District Attorney Paul Gallegos adamantly defended his decision to pursue a fraud lawsuit against Pacific Lumber Co. that was dismissed twice because the court found it had no legal merit.

“I think it was right to file the case,” Gallegos said.

He acknowledged that a considerable amount of time and effort went into the legal battle that has spanned four years and the county was at risk to pay the legal fees and possibly PALCO’s attorney costs.

A California Appeals Court published a rare 23-page decision and opinion Thursday upholding a Humboldt County Superior Court ruling that the fraud charges brought against PALCO under Unfair Competition Laws weren’t legally sufficient to go to trial and were dismissed on demurrer.

Going beyond simply upholding the demurrer ruling, the appellate court stated that Gallegos failed to prove that his case could be fixed to move forward and even if it did, the evidence presented “would not justify their prevailing at trial.”

After review, Gallegos said he disagrees with the court’s ruling, but respects the decision.

Gallegos’ alleged in his original suit, filed in 2003, that PALCO intentionally committed fraud to increase timber harvesting by manipulating watershed sediment reports during the environmental review that led to the signing of the controversial Headwaters Deal in 1999.

In a 2005 decision, visiting judge Richard Freeborn sustained a previous demurrer ruling that PALCO’s submission of an allegedly erroneous report and the subsequent resubmission of corrected data was protected under Civil Code “litigation privilege.”

The court noted that a corrected report was resubmitted more than one month before the permits were granted by state regulators and didn’t likely affect the outcome of an extensive and exhaustive administrative process.

Gallegos hasn’t ruled out an appeal of the ruling to the California Supreme Court, but said he wanted to consult with his colleagues before deciding.

According to its Web site, the Supreme Court must have an appeal served and filed within 10 days after the appeal court’s decision is final.

Gallegos stated he believes it is right for citizens to believe that businesses seeking logging permits should be obligated to provide truthful and accurate statements in environmental impact review processes.

Gallegos said a legislative remedy may be needed to address fraudulent data entering administrative hearings.
While Gallegos said he believes the California Environmental Quality Act process was undermined by the alleged fraudulent information by PALCO, he said it is uncertain if it would have played out differently if they had the correct information earlier.

“We really don’t know,” Gallegos said.

But Gallegos said what is known following the court ruling is that the sediment reports were protected under the litigation privilege laws

Frank Bacik, vice president and general counsel for PALCO, responded Friday to whether fraudulent information ever was submitted to regulators during the process.

“No, absolutely not,” Bacik said.

Bacik said there was never any need for the company to rely on the litigation privilege’s immunity defense.

“We don’t believe there was any misinformation or fraud,” Bacik said.

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